Exam 7: Inventories: Cost Measurement and Flow Assumptions

Exhibit 7-2 Edwards Co. purchased raw materials with a cost of $95,000 on March 2, 2015. Credit terms of 3/20, n/60 applied. -Refer to Exhibit 7-2. If Edwards uses the net method and pays for the purchase on March 31, 2015, what amount is recorded in the Purchase Discounts Lost account?

McClure Corp. purchased raw materials with a cost of $86,000. Credit terms of 3/10, n/60 apply. If McClure uses the net price method, the purchase should be recorded as

Because the specific identification method seems simple and matches actual costs against revenues, it may appear to be the ideal cost flow assumption to be used in any situation. Required: Indicate whether a periodic or perpetual inventory system is more appropriate for this cost flow assumption, indicate when its use is practical, and discuss the practical and theoretical objections to its use.

IFRS and GAAP are similar for all of the following inventory accounting standards except IFRS

What is the LIFO Valuation Allowance, also known as LIFO reserve?

Concerning purchase discounts, which one of the following statements is true?

The use of inventory pools with dollar-value LIFO overcomes the issues associated with keeping numerous detailed records of individual quantities of each item.

Given the following information for Goode Company: May 19 Sale 4 units Required: Answer the following questions for Goode Company: a. If FIFO is in use, what is the total ending inventory in dollars? b. If perpetual LIFO is in use, what is the cost of goods sold for the month? c. If weighted average is in use, what is the ending inventory? d. If moving average is in use, what is the cost per unit sold for the May 10 sale?

Which one of the following sets of inventory cost flow assumptions is not susceptible to profit manipulation by management?

Which one of the following statements is false?

The information below is provided for Sea Company: a. Compute Sea Company's 2016 ending inventory using dollar-value LIFO. b. Explain why a company would want to use dollar-value LIFO.

When goods are shipped FOB shipping point, the seller retains economic control until the goods are received by the buyer; therefore, the buyer should not record the goods into inventory until they are received.

The following information is available for Quest Company: Answer the following questions for Quest Company: a. If FIFO is in use, what is the ending inventory in dollars? b. If periodic LIFO is in use, what is the cost of goods sold? c. If moving average is in use, what is the ending inventory in dollars round calculations to the nearest cent)? d. If weighted average is in use, what is the ending inventory in dollars round unit cost to the nearest cent)?

If a company uses LIFO for annual reporting purposes, it must also use it for interim reporting. This enables external users to accurately compare financial statements.

Exhibit 7-1 Edwards Co. purchased raw materials with a cost of $95,000 on March 2, 2015. Credit terms of 3/20, n/60 applied. Edwards paid for the purchase on March 18, 2015. Calculate the amount at which Edwards would record the inventory on March 2, 2015, the date of purchase, using the method given. -Refer to Exhibit 7-1. Edwards uses a perpetual inventory system and the gross price method.

Which one of the following is an advantage of LIFO?

IFRS does not allow the use of LIFO because it

Which one of the following statements is false?

In a period of falling prices, FIFO produces the lowest cost of goods sold and the highest gross profit.

Which one of the following types of costs is most likely to be included in determining the cost of inventory?